Oil Prices Regain 3% After Trump’s Pause On Tariffs Increase

Oil prices rose on Wednesday, bouncing back from four-year lows earlier in the session, after U.S. President Donald Trump announced he would further increase tariffs on China but pause the tariff increases he announced last week for most other countries.

Trump authorized a 90-day pause as part of his tariff plan but also raised the tariff rate for China to 125 percent, effective immediately. The previously announced 104 percent tariff on China kicked in at 12:01 a.m. EDT (0401 GMT) on Wednesday, Reuters reports.

This is as Nigerian businesses, especially those exposed to exportation business lines, are already weighing up the impact of the tariff to decide whether to diversify business or continue with the current business plan.

Brent futures were up $1.82, or 2.9 per cent, to $64.64 a barrel at 2:02 p.m. EDT (1802 GMT). U.S. West Texas Intermediate crude futures gained $1.92, or 3.22 per cent, at $61.50. Both contracts had lost about seven per cent earlier in the session before the reversal.

“We’ve reached a turning point in the trade conflict with Trump giving the countries that have shown desire to work on a deal to get rid of tariffs some time to work it out,” said Phil Flynn, senior analyst with Price Futures Group.

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“What Trump is doing is putting China out on an economic island all by themselves,” Flynn said.

China announced additional tariffs on U.S. goods, imposing 84 per cent  tariffs on U.S. goods from Thursday, in retaliation against President Donald Trump’s tariff policy.

However, the escalating trade war between China and the U.S. continued to pressure oil prices.

The trade conflict is stoking fears of a global recession, said UBS analyst Giovanni Staunovo. “While oil demand has likely not suffered yet, rising concerns of weaker oil demand over the coming months require lower prices to trigger supply adjustments to prevent an oversupplied market,” Staunovo added.

Countermeasures in Canada, a close U.S. ally and major trading partner, also took effect on Wednesday.

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Easing up on his harsh tariff plans that was expected to hit 60 countries across the world, President Trump had paused the tariffs that were supposed to take effect yesterday for 90 days as he slammed China harder with a 125 per cent tariff for disrespect.

With the pause in the tariffs, Major stock indexes shot higher, with the Nasdaq last up about 10 per cent, also the value of the U.S. dollar – which had been lower earlier in the day – strengthened against the yen and other currencies after Trump’s announcement.

President Donald Trump also announced an increase in tariff against China to 125 per cent, in a rapidly escalating trade war that has seen China already retaliate with 84 percent tariffs, effective April 10.

Although the pause provided a respite, many believe that it does not remove the uncertainties that the rumors, declarations, and adjustments of tariffs will cause not only global trade but also the global economy.

The International Monetary Fund (IMF) had warned implementing the tariffs poses a “significant risk” to the global economy, as stock markets were hit by a punishing worldwide sell-off by investors.

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Managing director of the IMF, Kristalina Georgieva, had urged that the US and its trade partners fight off the temptation of escalating the trade war, whilst noting that the current sluggish outlook of the global economy could be worsened by the tariffs.

“We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth. It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty,” Georgieva said.

On the African continent, there  are strong indications that the aggressive tarring policies of United States of America(USA)’s President, Donald Trump may pose additional economic shocks in Nigeria, especially, to Small and Medium Enterprises(SMEs) and others in exporting business lines.

This is even as the country already grapples with currency devaluation, high inflation, declining oil revenue and high market inflation, hence, the increased cost of exporting to the U.S market may prompt Nigerian businesses to seek alternative markets with friendly tariffs.

While the tariff ensures Americans pay more for imported commodities into their country, there are insinuations too that insurance of import and export commodities and services from Nigeria to U.S may witness further hike in tune with the new tariff policies.

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However, another school of thought believes the vulnerability of the Nigerian economy to shocks of the current trade war unleashed by President Trump may be very limited.